Government negotiators at the International Maritime Organization (IMO) are likely to agree next week to put a price on at least some shipping emissions, with most of the money going to subsidise clean fuels and help ports and workers adjust to their use, sources close to the talks told Climate Home.
The negotiations in London run until April 11 – and nothing has yet been finally agreed. But governments are discussing the details of a proposal put forward by the talks’ Norwegian chair Sveinung Oftedal in an attempt to reach a compromise on the first such system for a global sector.
The proposal says that revenues raised for the new IMO Net Zero Fund should be spent within the shipping sector and its fuel supply chain.
It specifies that the money should be allocated to green fuels and the infrastructure and workers needed to transition to them, to protecting the maritime industry from climate change, and to addressing negative impacts from a carbon price on shipping emissions, such as food inflation caused by rising shipping costs.
A source with knowledge of the IMO discussions told Climate Home that “the predominant view is that how the revenue is spent has to be somehow connected to the sector”.
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Climate campaigners – and some countries, particularly small island and African nations – had hoped that at least some of the revenue would be spent on climate action in developing countries outside the shipping sector, on things like solar panels, drought-resistant seeds and rebuilding roads destroyed by floods.
Last week, Kenyan climate envoy Ali Mohamed wrote in a piece for Climate Home that the money raised should “transcend the maritime sector” and support “broader climate projects” including in landlocked states.
But some other developing countries do not want this money – much of which will be paid by shipowners in their nations – to replace the climate finance that rich governments are supposed to provide under the UN climate convention.
Friederike Roder, director of the secretariat for the Global Solidarity Levies Task Force, a multi-government initiative looking into international taxes to support climate and development, told Climate Home, “we need a solidarity contribution” from shipping.
“Negotiations are still under way,” she said, adding that the IMO “still has the possibility to deliver a historic agreement which doesn’t leave anyone behind”.
Size of fund up for debate
While negotiators agree that international shipping emissions should be priced, they remain sharply divided on how much of a ship’s greenhouse gas pollution should be covered and how high the price should be. This will determine how much money goes into the IMO Net Zero Fund.
Shipowners will have to pay if they don’t reduce emissions by a certain percentage by set years.
The chair’s proposal is to use the targets agreed for global shipping in 2023 – a 20% reduction in emissions by 2030 and 70% by 2040.
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If a ship does not meet these targets, it will have to buy a permit known as a “remedial unit” from the IMO’s Net Zero Fund. This is likely to be several hundreds of dollars per tonne of carbon dioxide equivalent (CO2e) emitted above the agreed level.
There is likely to be another, more ambitious stretch target. This could be the emissions goals that governments agreed to “strive” for in 2023 – 30% by 2030 and 80% by 2040.
The penalty for not meeting these stretch goals will be much less than not meeting the basic goals. Fees of between $50 and $150 per tonne of CO2e have been discussed.
Price on all emissions?
The Marshall Islands wants these stretch goals to be 100%, starting as soon as the rules come into place in 2028 so that all emissions would be subject to a charge from that year. The Pacific nation’s envoy for maritime decarbonisation Albon Ishoda said a tax on all shipping emissions “remains on the table – and that’s essential”.
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Some fossil fuel-reliant nations and shipping-dependent emergent economies like Brazil, China and Saudi Arabia do not support such a levy, and last week island nations expressed fears that the EU was backing away from the idea.
“A growing bloc of countries, particularly from Africa, the Caribbean, Central America, and the Pacific, is united in its focus on delivering ambition and equity for the Global South,” Ishoda added. “But when it comes to equity, our voices continue to be ignored. I have real concerns that the package being shaped may not be one that truly protects the most vulnerable or ensures no one is left behind.”
